- President Nakao says Sri Lanka to grow marginally slower than region
- But insists economy is “solid” and will reach 5.3% target
- Positive of efforts to increase revenue and IMF assistance
- Confident of future lending for infrastructure, water and Colombo port
- Lending agency leveraged record $10.74 b co-financing in 2015
By Uditha Jayasinghe in Frankfurt
Despite its high levels of debt, the Asian Development Bank (ADB) is confident of Sri Lanka’s growth prospects, which it believes will be enhanced with $1.5 billion assistance from the International Monetary Fund (IMF), though it will remain slightly below the regional average of 5.7%.
ADB President Takehiko Nakao told the Daily FT the country has maintained “solid” growth and the multilateral development agency is confident its economy will expand between 5.3% and 5.8% in 2016. Assistance from the IMF in the form of a three-year $1.5 billion facility will also boost confidence, he said.
“Overall Sri Lanka’s growth has remained solid after the conflict. There is room to enhance revenue collection and the IMF will help in that regard. So we are not worried about the debt situation. If sound macroeconomic policies are followed Sri Lanka should meet its growth targets this year,” the ADB President said.
The ADB, which is in the middle of formulating its latest five-year programwith Sri Lanka, is interested in water and transport projects as well as investment in the Colombo Port. ADB officials in Colombo had earlier indicated the agency is considering $1.2 billion in funding over the next two years.
However, Sri Lanka’s economic growth is still going to be marginally slower than projected regional growth.
Asia and the Pacific as a whole is projected to grow by a robust 5.7% in 2016 with strong long-term growth potential.
“To realise their potential, Asian countries must maintain sound macroeconomic policies, invest more in infrastructure, human capital and technology as well as develop efficient financial markets and improve the business climate,” Nakao told the ADB World Conference opening briefing.
Asia will continue to demand $800 billion annually for infrastructure development, which the ADB is expanding to finance. Under a new merger between the Asian Development Fund and Ordinary Capital Resources from next year, annual grant and loan approvals will increase by 50% from $13 billion in 2014 to more than $ 20 billion by 2020.
ADB also leveraged a record $10.74 billion in co-financing in 2015. When combined with $16.44 billion from its own resources for grants and loans and technical assistance, total assistance reached $27.17 billion, says ADB’s Office of Co-financing Operations (OCO) in its annual report released on Monday at ADB’s Annual Meeting in Frankfurt, Germany.
The co-financing figure includes $6.17 billion—the highest amount ever raised through robust partnerships with bilateral and multilateral organisations, foundations, corporations, and other sources of concessional funds—to support 69 investment projects and 85 technical assistance projects. Despite global fiscal constraints, financing support from these development partners increased by 39% from $4.43 billion in 2014. The remaining amount came from commercial co-financing.
“We are grateful for the contributions from our development partners,” said OCO Head, Rune Stroem. “Through joint efforts and deeper collaboration, we experienced an unprecedented level of co-financing in 2015. Together with our partners, we intend to improve delivery of programs and projects to yield concrete and measurable results for our developing member countries.”
The record co-financing amounts were driven by several initiatives, the OCO report said. In 2015, ADB became the first multilateral development bank accredited by the Green Climate Fund (GCF) Board. German development bank KfW approved $1.1 billion in co-financing for five projects in the energy sector under its $2 billion framework agreement with ADB.
The Government of Japan continued its strong support for innovative poverty reduction and social development activities through $108.7 million of new commitments to ADB trust funds. The Kuwait Fund for Arab Economic Development agreed to strengthen its institutional partnership with ADB and to improve Nepal’s community-managed irrigation systems and agricultural practices through $17 million in loan co-financing.
The ADB is also encouraging emerging markets to provide more funding to poorer countries for grants and concessional funding.